People & Skills
The Greek Negotiation Strategy – How NOT To Use a BATNA!

So in the end, as so often in negotiations, it came down to the BATNA.

Over recent days, Greece conceded and agreed pretty much the package of austerity measures that their referendum had rejected just days earlier. Indeed, the agreement may be even tougher than that the country rejected a few weeks ago. Spending cuts, VAT increases, reductions in defence spending – all elements of the deal that had been resisted are now agreed. Frankly, this has been an appalling performance by Syriza and Alexis Tsipras, who seem to have achieved nothing but six months of the Greek economy going backwards. History will judge them very badly.

But why has their negotiation been so unsuccessful? Some commentators talk about bluff and counter-bluff, but behind the bluff, the game theory, the late-night shouting matches, we come back to the most important factor in negotiations – your Best Alternative to a Negotiated Agreement (BATNA). That concept was first described in the seminal negotiation book “Getting to Yes”, written by Fisher and Ury of the Harvard Negotiation Project and published in 1981, deservedly became a best seller. It remains probably the single most useful book on business negotiation.

So what exactly do we mean by a BATNA? It is simply the most attractive alternative that a party to a negotiation holds if the negotiation does not give them the outcome that they are looking for. We might call it a “fall-back position” or “what on earth do we do if the other side won’t back down?!”

It is easy to see just why this is so important. If your BATNA is strong, you have a good alternative if you can’t get what you want, so you feel relatively comfortable about walking away from the negotiations. If your BATNA is weak, then of course your position is weaker too – assuming the other party knows that it is weak (and that point takes us into some interesting areas too). If the alternative to an unsuccessful negotiation is not attractive, then the pressure is on you to settle, to concede negotiation points, even if you are not really happy about the result.

So what happened in Greece? Well, it seems like Tsipras claimed that Greece had a reasonably positive BATNA – to just refuse to agree the measures yet also say “but we are not leaving the Euro”. Unfortunately, this BATNA simply did not exist in reality! That is because the other Euro members made it clear Greece would be ejected if agreement was not reached. So his only other real BATNA was really to leave the Euro.

But he – and Greece generally – had made it clear over many months that they did not want to do that. They had not even presented it themselves as a potential BATNA. Therefore, their opponents in the negotiation could see that the BATNA Greece presented really was false, and were confident that Greece would back down. In fact, not only was the BATNA false, it lay in the hands of their opponents as they (the other countries) could decide whether Greece could stay in the Euro or not!

What Greece should have done was to present leaving the Euro as a serious option, a BATNA that was actually not too bad for the country. They should have said “we want an agreement, we want to stay in the Euro, but if we can’t reach a fair agreement, then OK, we will consider leaving”. And of course that BATNA had many issues for the other countries, although the longer the negotiations have gone on, the more other countries have come to the view that even exit is not too bad a result for them. But Greece developing that alternative earlier in the process would have put their negotiators in a far better position.

But the problem was that the Greek people consistently said they did not want to leave the Euro, and those people were also fed the “false BATNA” – that we can say “no” but stay in the Euro. Really, Syriza should have been selling the idea of Greece leaving for months to their own people as well as to the rest of Europe. And we’d suggest the referendum should have said “do you want to reject the proposals even if that means we leave the Euro”?  Now it might then have got a “Yes, accept the proposal” response from the population, but at least it would have avoided the situation now, with Syriza and Tsipras losing all credibility. We suspect there is going to be a lot of bitterness once their citizens realise they have agreed a deal that is worse than those on the table some months ago, and all that has been achieved is six months of the economy collapsing – for what purpose?

So, remember to think hard about your BATNA in any negotiation situation. Work to improve it if it is weak. Promote the idea to the other party that it is a strong BATNA – that you wouldn’t mind going that route if they don’t negotiate in a reasonable manner. And don’t do what Tsipras did – rule out what would have been perceived by your opponent as a fairly strong BATNA, and instead present one that does not even exist.

First Voice

  1. Dan says:

    Personally speaking, my reading of the situation is slightly different – although it does boil down to the BATNA, Tsipras’ strategy was based on an analysis of the Troika’s BATNA rather than his own.

    I think he thought that the Troika would, in the end, not eject Greece from the Euro as this would send a signal to the world that the currency is not sustainable and would set back the European ‘project’ by decades. He thought that, in the last resort, the creditors would put political interests before financial ones (not an unsafe assumption since the currency itself actually is a political scheme rather than an economic/fiscal one) in order to save the European Union. He bluffed. They called him on it.

    I think there’s another interesting lesson here. One of the reasons why the final agreement is so harsh is that the creditors no longer trust him to carry out his promises due to the way he has acted throughout this whole saga. It shows that your behaviour/negotiating tactics can have a big effect even after the negotiations are over. A warning against short-term thinking when you’re in a long-term relationship perhaps?